Many of the topics we address as a firm focus on the technical aspects of a transaction, such as market observations, quantitative measurements, and other deal points, but seldom do we discuss the emotional side. While the financial aspects of a deal are important, the intangible feelings associated with selling a business also have a significant impact on the process. Here we explore the emotional side of selling and provide five tips for achieving a successful outcome.
Selling a business involves many different challenges. Corporate sellers generally have the benefit of emotional detachment from the selling process and are typically focused more on price and execution. Entrepreneurial sellers have the added burden of dealing with a multitude of emotional challenges, such as letting go of a business they have created, built up, and managed for a long time. This dynamic should not be ignored.
In our experience, the emotional aspect of selling a business must be discussed and dealt with early in the sale process, so it's an area of focus as we counsel sellers on all facets of the sale of their business. In more than 25 years in the industry, we have encountered the full spectrum of emotions from our clients. Some easily isolated their emotions from the process, while others were so emotionally charged that they ultimately prevented a transaction, only to later regret their actions. However, for most sellers it is somewhere in between. Based on our experience, here are five suggestions for anyone contemplating the sale of their business to help ensure its success.
The decision to sell should be part of a well-thought-out process, not a knee-jerk or impulsive reaction. Once that decision has been made, physically take note of the reasons behind your decision. As you work through a selling process that can often be tedious, refer back to your rationale periodically. This will help you reinforce why you started down the path to selling your business in the first place, and will ultimately keep you focused on the end goal. It is important to bring a balanced perspective to the table, reminding yourself to be disciplined with your reasoning and to stay committed to the process, all while keeping your eye on the prize.
We have found that many entrepreneurs have been in charge of their businesses for so long that they have a hard time relying on the advice of others. While this is understandable, the level of trust between seller and advisor is a crucial aspect of achieving a successful sale. You have to trust that your advisor knows what they're doing, so as to not second-guess their every move. This is especially important in regard to the valuation process. Advisors take many important factors into account when determining an optimal deal price, so you have to trust them to get it right. We have encountered numerous situations in which a seller was presented with an outstanding offer only to push for a higher price. Not only does this seldom work, this demand for a higher price can also be dangerous, resulting in the elimination of a strong, viable offer without correctly taking into account all other deal factors. It is important to determine what price you are willing to sell at--and then stay committed to that price. It's natural to hope there is a better offer out there, but trusting the advisor you have chosen and remaining realistic are key. As a seller, you must understand the valuation dynamics of your business and be prepared to act when the right deal presents itself.
As the seller, you must be direct and decisive. Don't waffle with your decisions. Make up your mind and stick with it. You are not merely a deal participant, you are the chief decision-maker, so it is important that you act as such. This doesn't mean that you need to micromanage the direct day-to-day dealings. In fact, it is best if you stay away from the smaller, menial tasks. If you bring in the right advisory team to manage your sale, daily dealings will not be of any concern. However, there are always important times for you to be personally involved in the process. They just shouldn't be too early or too often.
Selling your business can be a long and complicated process, so you must remember that your deal isn't going to happen overnight. Buyers will want to conduct their own in-depth due diligence to ensure they are making the right investment by purchasing your business. They also have financing issues to consider, the question of real estate control, how to manage potential capital expenditures, and the review of all asset conditions. It is essential to remain patient during this process. It isn't just about getting it done, it's about getting it done right.
It is one thing to understand the process the buyer is undertaking, but you also must recognize how your deal looks from the buyer's perspective. To buy a business, one must meet certain capital requirements, which can be easier said than done. As advisors, one of our primary concerns is maximizing the financial return for our seller, but it is also necessary to take into consideration the financial return for the buyer. A good question to ask yourself is, "Would I buy this business at the same price I'm seeking?" It is imperative to maintain objective valuation goals. In this day and age, the market is fairly sophisticated and efficient, so buyers will walk away from a transaction if they feel the deal is one-sided.
Selling your business is an exciting venture, but there always is the chance it will be a long and arduous process. Finding a way to remove yourself from day-to-day trials and tribulations will ultimately go a long way in helping you control your emotional reactions throughout the course of the deal. You hired an advisory firm for a reason, so let these professionals carry the ball for you.
The last thing you want to do is have emotional reactions that depart from your well-thought-out intentions, arbitrarily throw a grenade into the room, and irreparably harm the transaction. Instead, be one of the sellers who deals with the five factors we addressed above in an open and honest way and you will be far more likely to achieve a successful sale--and avoid a great deal of unnecessary frustration and fatigue.
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